MARC affirms AAAIS rating on TNB Northern Energy's outstanding RM1.475 billion sukuk

MARC has affirmed its AAAIS rating on TNB Northern Energy Berhad's outstanding Islamic securities (sukuk) of RM1.475 billion with a stable outlook.

TNB Northern Energy is a wholly-owned subsidiary of TNB Prai Sdn Bhd and was set up to construct a 1,071.43-MW combined-cycle gas turbine power plant in Seberang Perai Tengah, Penang. TNB Prai in turn is 100%-owned by Tenaga Nasional Berhad (TNB, rated AAA/Stable). The power plant commenced operations in February 2016 and has been receiving availability-based revenue under a 21-year power purchase agreement (PPA) with offtaker TNB.

TNB Northern Energy’s AAA rating is equalised to the rating of TNB, based on, among other factors, TNB’s financial commitment to provide a rolling, unconditional and irrevocable guarantee for an amount equivalent to the next six-month financial service of the sukuk. TNB has also provided an undertaking to maintain full ownership of TNB Northern Energy and TNB Prai. The substantial operational and financial linkages between the entities further underpin the rating equalisation. Consequently, any change to TNB’s credit profile or the ownership of the power plant could impact the rating.